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ST Engineering eyes more than doubling of Smart City revenue to $2 bil by 2022

PC Lee
PC Lee • 2 min read
ST Engineering eyes more than doubling of Smart City revenue to $2 bil by 2022
SINGAPORE (July 5): ST Engineering aims to grow its Smart City revenue of $1 billion to more than double by 2022.
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SINGAPORE (July 5): ST Engineering aims to grow its Smart City revenue of $1 billion to more than double by 2022.

The group also plans to grow its core and other business segments with CAGR of 2-3x global GDP growth rate over the next five years, and expects that two-thirds of its revenue growth will be from global markets by 2022.

ST Engineering’s strong order book of $13.4 billion as at end March, providing stability and visibility. Out of this, $3.2 billion is expected to be delivered in the remaining months of April to Dec.

In FY17, Aerospace contributed 51% of group pre-tax profit, followed by Electronics at 34%, Land Systems at 14%, and Marine & Others at 1%.

This week, the group announced the divestment of 25% stake in its indirect associate, Airbus Helicopters SE Asia (AHSA) to JV partner, Airbus Helicopters SAS for EUR9.125 million ($14 million) in cash.

AHSA was set up between ST Engineering and Airbus Helicopters in 1977 to provide helicopter sales, repair, overhaul, logistics and product support services.

The divestment is a result of ST Engineering’s ongoing business review to streamline capabilities and optimise resources within its aerospace sector.

To be sure, ST Engineering’s share price has corrected by about 12% from its peak of $3.70 in mid April and is now trading at 17.5 times forward P/E with a forecast dividend yield of 4.7%.

In at least the past five years, the group has been paying out full year dividends of 15 cents per share; from FY13-FY16 a portion of this was paid as a “special dividend”.

OCBC is maintaining a “buy” on ST Engineering, with a lower fair value estimate of $3.90 from $4.00.

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